Glencore Energy v OMV Supply and Trading - The Seagrace

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Glencore Energy UK Ltd v OMV Supply & Trading Ltd (The “Seagrace”)

English Commercial Court: Sir Ross Cranston: [2018] EWHC 895 (Comm): 23 April 2018

Chris Smith (instructed by Clyde & Co LLP) for Glencore

Henry Byam-Cook (instructed by Holman Fenwick Willan LLP) for OMV



The CFR sale contract terms were such that waiting time offshore en route to the port of discharge (which was agreed by way of an implied contract between Buyers and Sellers) was a claim for detention, to be compensated at the demurrage rate, plus the value of bunkers consumed for the waiting period. In consequence, the claim for detention was not subject to the demurrage claims presentation time-bar, which required demurrage claims (strictly so-called) to be presented in writing to Buyers within 90 days of completion of cargo discharge.

Case note contributed by Jim Leighton, LLM (Maritime Law), LLB (Hons), BSc (Hons), Solicitor of England & Wales and International Contributor to DMC’s Case Notes


Sellers, Glencore, chartered the vessel, “Seagrace”, from their in-house shipping services providers, ST Shipping and Transport Pte Ltd, on an amended BPVOY4 form voyage charterparty to meet their sale contract obligation to Buyers, OMV, for the sale of 80,000 mt of Siberian light crude oil to be loaded at Novorossiysk, Russia, between 10-14 November 2015, with delivery to be on CFR (Cost & Freight) terms at one safe port/berth basis Augusta, Italy (in the event, the SIOT, Società Italiana per l'Oleodotto Transalpino SpA, terminal at Trieste). The definitions within the sale contract indicated that: "discharge port" meant the berth at which the oil was to be discharged; "laytime" meant the time allowed to Sellers for loading under the terms, or the time allowed to Buyers for discharge under them; and “NOR” meant “the valid notice of readiness to load or discharge, as the case may be, as given by the Master of the Vessel ... to the Seller ... at the Loading Terminal or to the Buyer … at the Discharge Port respectively.”

The other relevant contractual terms were the following:

The Sale Contract – clauses 9 and 10

“9. Laytime Laytime allowed at disport shall be 36 hours, commencing 6 hours after tendering of notice of readiness or upon commencement of discharge, whichever first occurs. Laytime computation shall be as per the general terms and conditions.

10. Demurrage Except as herein provided, for all time exceeding the allowed laytime, Buyer shall pay demurrage to Seller in accordance with the actual charterparty rate. Any claim for demurrage to be received latest 90 days from completion of discharge otherwise it will be deemed to have been waived, and any such claim not to exceed the amount properly due by seller to the shipowner. Seller will supply Buyer copy of owner’s claim prior to payment.”

The BP Terms - a reference to the 2007 edition of BP Oil International Limited’s General Terms and Conditions for Sales and Purchases of Crude Oil (“the BP CFR Terms”)

Section 13, headed “Time allowed, delays and demurrage”. 

Clause 13.1 covered time allowed for discharge, 36 hours. Running hours were dealt with in clause 13.1, which provided, in part:

“13.2.1 Running hours shall commence Berth or no Berth 6 hours after NOR is tendered or on commencement of discharge, whichever is the earlier. For the purposes of calculating running hours, discharge shall be deemed to be completed upon disconnection of discharging hoses.”

Clause 13.2.2 set out certain exemptions when delay was not to be counted, including at clause 13.2.2(b) “inward passage until the Vessel is securely moored at the Berth…”

There was a time-bar for demurrage claims in clause 13.2.4.

Following loading and commencement of the cargo-carrying voyage, whilst the vessel was en route to the port terminal, Buyers requested the vessel to wait off Corfu - because of the lack of berthing prospects at the port of discharge - and to tender notices of readiness at both the waiting area and on arrival at the port of discharge proper in due course. In so doing, Buyers requested the Master to confirm the quantity of bunkers on and the dates and times of arrival at and departure from the waiting area, which he did. They also obtained the demurrage rate from Sellers.

As between Sellers and their in-house shipping service providers, the voyage charterparty provided for such time spent waiting offshore to count on the basis of the laytime and demurrage provisions in the shipping contract. Having paid Owners the amount due for waiting offshore under and in accordance with the terms of the voyage charterparty, Sellers sought payment from Buyers on behalf of their in-house shipping services providers. Buyers argued that Sellers’ claim was for demurrage and was thereby time-barred for want of compliance with the 90 days given for such a claim to be made in writing after completion of cargo discharge, in accordance with the demurrage claims presentation time-bar in the sale contract.

The position of Sellers was that the claim was for detention (properly so-called) based on an implied contract and was not one that fell within the laytime and demurrage provisions of the sale contract. These dealt only with laytime and demurrage accruing at the actual ports of loading and discharging after the vessel’s arrival at, and her tender of notice of readiness, there.


Having set out the material provisions of the contracts, the factual background and relevant circumstances of the dispute, the Judge first determined that he was unable to accept the primary contention of Buyers (that the sales contract covered this situation in that laytime was brought forward by the serving of the NOR on arrival at the waiting area, with the demurrage provisions following mechanically), for the following reasons:

(1) The only provision expressly addressing waiting time to which Buyers could point – namely Clause 22 of the BPVOY4 form - was not part of the sales contract. In any event, that clause made no reference to serving an NOR, nor to Owners being entitled to claim the cost of bunkers consumed while waiting.

(2) What happened in fact did not fit within the sales contract terms. Clause 9 referred to laytime at the port of discharge, and the definition of laytime in the BP CFR Terms, incorporated in the sales contract, was the time allowed for loading and unloading. Thus, the sales contract terms did not contemplate that laytime could run in the middle of the carrying voyage, which was consistent with authority on the distinction between laytime/demurrage claims and detention claims (fn.1).

(3) There were other short-comings in Buyers’ contentions, as the sales contract terms by definition expected a NOR to be issued at the port of discharge to unload the cargo. Buyers were unable to explain how the running of time was stopped on departure from the waiting area and was triggered again at the port of discharge, as the sales contract provision that time spent on an inward passage was not to count as laytime or demurrage applied only to an inward passage taking place within the port itself, not to a passage to the port from a place of waiting in the course of the voyage.

Having decided the primary contention of Buyers, the Judge equally found himself unable to accept their secondary contention (that, as a result of Buyers’ requests of 9 and 16 November 2015, and Sellers’ acceptance, the sales contract was varied), for the following reasons:

(A) There was no basis for the sales contact to have been varied: Clause 9 would need to have been rewritten so as to apply to the waiting area, to address the need for a second NOR at the port of discharge, and to address the situation regarding the six hour period before laytime commenced. Amendments to Clause 10, and to Clause 13 of the BP CFR Terms, would also have been necessary, so that the demurrage rate applied as well to delays mid-voyage, and to clarify whether the exceptions to laytime applied as regards the waiting area.

(B) In the Judge’s view, the correct legal analysis of what happened in this case was straightforward: this was to be characterised as “delay by agreement” (fn.2). While not exactly on point, Saville J's decision in The “Saronikos” (fn.3) supported this conclusion. There, owners had agreed to charterers’ request that the vessel wait off the port, and the charterers had accepted that owners were entitled to reasonable remuneration for waiting. Thus, the issue was over the calculation of the amount. In the course of his judgment, Saville J said that the position was that charterers had requested owners to perform services outside the terms of the charterparty, services which they were not obliged to perform, but owners having agreed, there was an implied contract that they should pay remuneration for those services. Saville J held that it was unrealistic to treat the request as a breach of contract and, in the absence of agreement between the parties, it would be "wrong to regard the extra contractual services as though they had been performed to any extent under the contract, for the simple reason they were not" [at p279].

(C) In the Judge’s view, an implied contract was necessary “to give business reality to a transaction to create enforceable obligations between parties who are dealing with one another in circumstances in which one would expect that business reality and those enforceable obligations to exist” (fn.4). Without an implied contract, Sellers would not be paid for their services since, for the reasons explained, the express provisions in the sales contract for remuneration by way of demurrage did not apply, nor was there any agreement to vary the sales contract terms.

Accordingly, the Judge held that, in light of the contemporaneous email exchanges at the time, there was an implied contract for Buyers to compensate Sellers for assenting to the request for the vessel’s extra-contractual wait off Corfu under the sales contract, and the compensation to be paid to Sellers was implicitly the demurrage rate for, plus the value of the bunkers consumed during, the waiting period, which accorded with The “Saronikos” (fn.3).


The judgment in this case is a good example of how English law can be flexible by adapting to meet needs arising between separate but related contracts, one for the sale of goods carried by sea (sales contract) and the other for the carriage of goods by sea (voyage charterparty), when extra-contractual services are given.

In this instance, the way in which Buyers and Sellers interacted, despite the gap in the sales contract compared to the voyage charterparty (that is, the contractual position was not back-to-back), meant Sellers were entitled to be compensated for assenting to Buyers’ extra-contractual request for the vessel to wait offshore pending their further orders to proceed to the port of discharge.

The judgment also highlights the need to exercise care in identifying the true nature of a claim, as in this case, with the sales contract scheme being such that the laytime/demurrage provisions did not apply to compliance with Buyers’ waiting orders, such that a detention claim (strictly so-called) arose by implied contract, and so was not caught by the demurrage claims presentation time-bar.

The interpretation of the sales contract, given the explicit definitions as to when the laytime/demurrage scheme applied, can be contrasted with the voyage charterparty in The “Ocean Neptune” (fn.5), where the laytime/demurrage provisions were sufficiently wide to encompass explicitly awaiting orders other than at the port of discharge, even though time was only to “count as” laytime/demurrage, resulting in the demurrage claims presentation time-bar becoming relevant.

Footnote 1: The “Mass Glory” [2002] 2 Lloyd’s Rep 244

Footnote 2: Laytime and Demurrage (7th Ed, 2016), pars 8.7, 8.76-8.85

Footnote 3: [1986] 2 Lloyd's Rep 277

Footnote 4: The “Aramis” [1989] 1 Lloyd's Rep 213, 224 per Bingham LJ approving May LJ in The “Elli 2” [1985] 1 Lloyd's Rep 107, 115

Footnote 5: Lukoil Asia Pacific Pte Ltd v Ocean Tankers Pte Ltd [2018] EWHC 163 (Comm), see DMC’s CaseNote at [[1]]